Taxation is one of the primary powers of government over the people. The process where by charges are imposed on individuals or property by the legislative branch of the federal government and by many state governments to raise funds for public purposes. Taxation is a mode of raising revenue for public purposes. The term is ordinarily used to express the exercise of the sovereign power to raise revenue for the expenses of the government. It is the act of levying a tax; i.e., the process or means by which the taxing power is exercised (Cooley on taxation, Sec. 6p.72). Taxation is an inherent power of the state. It may not be conferred expressly by the people. The power exists even if a state’s constitution does not contain an express grant of such power. Hence, constitutional provisions relating to the power of taxation do not operate as grants of the power of taxation to the government but instead merely constitute limitations upon a power which would otherwise be without limit.
Importance of Taxation
Taxation is a power emanating from necessity. As explained in one case, a tax is a necessary burden to preserve the state’s sovereignty and a means to give the citizenry an army to resist aggression, a navy to defend its shores from invasion, a corps of civil servants to serve; public improvements designed for enjoyment of the citizenry and those which come within the states territory and facilities and protection which a government is supposed to provide. (Phil. Guarantee Co. Inc. vs. Com. Int. Rev. GR L-22074, April 30, 1965). The theory that underlies taxation is that charges are imposed to support the government in exchange for the general advantages and protection afforded by the government to the taxpayer and his or her property.
The existence of government is a necessity that cannot continue without financial means to pay its expenses; government can neither exist nor endure. The government has the right to compel all citizens and property within its limits to share its costs. The state and federal government both have the power to impose taxes upon their citizens. The government ability to serve the people depends upon the taxes that collected. Taxes are indispensable in the government operation and without it, the government will be paralyzed. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. No government in the world can run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning.
The Government can also use taxation to encourage or discourage certain economic decisions. For example, reduction in taxable income(or household) income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates more jobs. Taxation upon a taxpayer (an individual or legal entity) by state such that failure to pay is punishable by law. When taxes are not fully paid, civil penalties (such as an incarceration) may be imposed on the non paying entity or individual. It is a mode by which government make exactions for revenue in order to support their existence and carry out their legitimate objectives. (Tax law and Juris prudence by Justice Vitug. 2000). It is the inherent power by which the sovereign state imposes financial burden upon persons and property as a means of raising revenues in order to defray the necessary expenses of the government (Tax Digest by Crescencio Co Untian 2002 Ed). Nonetheless, it is the most pervasive and the strongest of all the powers of the government. Taxes are the lifeblood of the government, without which, it cannot subsist (Lifeblood Doctrine).
History of Taxation
In history of taxation, the first known system of taxation was in ancient Egypt around 3000 BC- 2800 BC in the first dynasty of the old kingdom. In Biblical times, tax is already prevalent. According to Genesis 47:24. But when the crop comes in, give a fifth of it to pharaoh the other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children. Earliest taxes in Rome, taxes known as Portoria were customs duties on imports and exports. Augustus Caesar introduced the inheritance tax to provide retirement funds for the military. In England, taxes were first used as an emergency measure. In the Philippines, the pre-colonial society, being communitarian, did not have taxes.